The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage

Material Type

Article

Language

English

Title

The Real Effects of Financial Shocks: Evidence from Exogenous Changes in Analyst Coverage

Author(S)

FRANاOIS DERRIEN (Author)

Abstract

We study the causal effects of analyst coverage on corporate investment and financing policies. We hypothesize that a decrease in analyst coverage increases information asymmetry and thus increases the cost of capital; as a result, firms decrease their investment and financing. We use broker closures and broker mergers to identify changes in analyst coverage that are exogenous to corporate policies. ...